IT channel sales and marketing strategy for the digital era
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Transitioning to cloud services requires a number of business changes, not the least of which impact sales operations. In order to run a profitable cloud services business, IT channel companies must retool their sales teams, processes and operations to support a recurring revenue stream. This includes transitioning from a sales staff that consists entirely of "hunters" to a staff consisting of both hunters and "farmers."
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"[Hunter and farmer] are very conventional sales terms," said Carolyn April, director of industry analysis at CompTIA. "The classic hunter is your superstar, the aggressive one who finds net new business. Farmers do account management on the back end, serving existing customers. They attempt to upsell, cross-sell and account-manage clients that are already onboard."
"There's more of a need for farmers now because of cloud and managed services. Whenever you are putting customers on long-term contracts and providing long-term services, there is a stronger need for a bench of farmers to take care of those customers," April said.
According to Ryan Morris, principal consultant of Boulder, Colo.-based Morris Management Partners, a recurring revenue model like cloud services requires farmers to be successful. "If I'm a traditional IT reseller … most of my money is made right upfront. The key to success is going to be one sales guy who can go out and find one brand-new customer, then do it again and again and again. That's where the big money is. In the cloud world, where the financial model is based on an annuity over that time, retention matters more than acquisition in terms of the fundamental profit calculation," he said.
Terry HeddenCEO, Marketopia
Morris explained that cloud service providers accrue the expense of acquiring new customers upfront, but they only receive a portion of the revenue from that customer. "The only way to break even and turn it to profit is if the customer stays around through month three, six, nine, 12, 24. Sustaining that relationship is a more mission-critical activity than finding a new customer. There is some cost that can only be recovered over a period of time, so there has to be a sales [person] that is responsible for maintaining the relationship and [that is] awarded for maintaining the relationship," he said.
The role of the farmer
Like the sales hunters, farmers are proactive. "The farmer cannot just wait for the customer to come to them. The farmer must approach the customer about new business development initiatives. They have to be pitching proactively, seeking new buckets of money, new budgets and decision makers, new solutions they can deliver, and proactively recommending transactions," Morris said. "The farmer has to be there to say, 'You are so satisfied with this cloud service you are buying from me, I'm not just going to rest on the laurels of the current run rate. I'm proactively going to initiate new opportunities."
This doesn't mean the farmer is continuously pushing technology just to make the sale. "Retaining the customer in the cloud is not about technology; it's about customer service and being a trusted advisor," said Terry Hedden, founder and CEO of Marketopia, a St. Petersburg, Fla.-based sales empowerment and demand generation firm for managed IT service firms.
This requires understanding the customer's business goals to determine, for example, if they will exceed their storage soon, April said. In order to be successful, she said the farmer must have good communication and management skills.
The level of technical knowledge required depends on the organization. "A lot [of IT solution providers] will have account reps who are the farmers [and] who are the liaison to the existing customer, but on the back end, they have technical managers or engineers who then will help with more of the IT-related questions," April explained. "But you're in the IT business, so those account managers in the middle should not be completely ignorant of IT. They don't need to be high-level engineers, but you do need someone well-versed in general IT," she said.
For Tom McDonald, president at Naugatuck, Conn.-based NSI Total Care, technical skills are important, but with a caveat. "If they have technical ability, they have to come from an environment that has some kind of customer service aspect -- help desk, troubleshooting. Those are easier people to transition into the [farming] conversation, because it's not a sales conversation," he said.
Where to find farmers
Both April and Morris recommend hiring farmers from outside of the IT industry. "If you are an IT company and you can't take a very capable professional and teach him the basics of IT in three weeks, then that's your failing, not his," Morris said. "Intelligent people can learn this stuff. I find that learning the skills to prospect, farm and maintain credibility -- that takes years."
Morris recommended looking for farmers in industries that are similar to IT. "If you think of the nature of what we're selling, it's complicated, it's expensive and it's risky. What other industries are like that? Financial services is a natural example, but there are others. Also look at industries that are annuity oriented," he said.
McDonald is always looking for potential farmers. "I enjoy cold calls from people who walk in off the street. If someone comes in to sell something, I'm always looking that way to see if they have the skills. You never know. If you get your car serviced, maybe they are good at what they are doing and looking for a change," he said.
While hiring farmers takes some time and effort in terms of training, there is good news for IT channel companies developing their cloud business. "Farmers by nature are much more common in the wild than hunters are. It is much more frequent and common to find a natural-born farmer than it is to find a natural-born hunter," Morris said.
Another difference between farmers and sales hunters: commission and compensation structures. "Hunters work off of commission, whereas farmers often have a base structured salary with some commission-type incentives for various things they accomplish over the month or the quarter," April said.
However, there's a benefit here, too: "Farmers do tend to be more junior [than sales hunters]. An organization is able to save quite a bit budget-wise on a large farming team, because you tend to have those be more junior people and you have to pay them less," April said.
Get more tips on transitioning sales to a recurring revenue stream:
Learn how to develop a successful cloud sales strategy
Switching to managed services means restructuring the sales team